Business opportunity by Market Size

Market size calculations assess a business opportunity at a certain point in time or over successive periods.  The TAM (Total Addressable Market) measures the size of a market that a service/product is in (inclusive of all competition).  This post explores a model for calculating market size while highlighting potential risks and improvements to the analysis.

Estimating NPU (Neural Processor Unit) Market Size

NPUs are slowly gaining ground in the mobile processor market and it would be interesting to forecast the uptake of these chips over the next five years.  Applications for NPUs in mobile continues to increase alongside advances in NN (Neural Networks) algorithms and ML applications (Speech to Text, Face/Voice Recognition, Digital Assistant).  The image below shows my back of the envelope calculation for the TAM in USD over the next five years. 

The math here is quite dry but what makes these calculations interesting are the different assumptions and approaches that you can make when concluding on a value.  Here’s how I came up with the TAM:

Rationale

• # of Smartphones
  • An analysis from CSS shows that the mobile market is project to have a flat shipment of 1.9 billion units from 2019 over the next 5 years. https://www.ccsinsight.com/blog/global-mobile-phone-sales-will-decline-in-2019/
• # of Phones that are Smartphones & ~ # of smartphones that are Entry, Mid and Premium
  • Arm Roadshow slides in Q4 2014 indicated the proportion of smartphones across each category.  The numbers have been scaled to reflect the shipment of phones in 2019.
• # of Application Processors per Smartphone
  • Arm Roadshow slides in Q4 2014 estimate the average number of processors per Entry, Mid and Premium Smartphone.
  • Increase in average of one app processor per year as phones increase in performance.
• % of Application Processors with an NPU in 2019
  • http://ai-benchmark.com/ shows NPUs were shipped in the majority of SoC (12 total) for premium smartphones in Q418/Q12019.
  • These SoCs had an average of 1 NPU. Therefore the % of App Processors that are NPUs in 2019 is 1 out of a total of 26 app processors in all smartphones. 
  • 26 = 15 + 8 + 3 = 26 and 1/26 ~ 4%

  • Increase of 2% per year for proportion of phones incorporating an NPU. This was an arbitrary decision and scales to 15% in 2024.

•  TAM
  • Total # of NN Application processors multiplied by a proposed cost of an NPU ($10)

Risks to the Model

• Change to mobile market growth (slowdown/increase) causing deviation to the model e.g. economic crisis
• Social trends in buying premium mobiles affects flagship phone sales
• Model needs to be adjusted for inflation
• Herd Behavior (basing calculations on other models/estimations) may have affected the accuracy of the model